Low grain export prices cost Rs 1,608 cr in subsidy

CAG REPORT

By setting the export price of wheat at a level lower than the central issue price, the ministry of consumer affairs had disregarded a decision of a group of ministers set up for the purpose.

This resulted in an additional subsidy burden of Rs 1,608.63 crore during November 2000 to February 2004, the Comptroller -and Auditor-General of India (CAG) said in a report tabled in Parliament last week.

Despite the GoM's decision that wheat be offered for exports at a price equal to the economic cost minus two year's carrying cost, which worked out to be Rs 6,044 per metric tonne during 2000-01, the ministry had set an issue price of Rs 4,150. Similarly, the issue prices in 2002-03 and 2003-04 were also lower, the CAG said.

The CAG said the setting of a lower price by the ministry was owing to adoption of a lower economic cost and higher carrying cost, which had led to the additional subsidy burden.

The Centre had allowed FCI to offer wheat and rice for exports to help liquidate excess stock in the central pool. According to the CAG's estimates, the economic cost and sale value of the quantity of wheat and rice issued for export were Rs 33,927 crore and Rs 19,792 crore, respectively.

The report said, because of the pick-and-choose policy allowed to exporters in obtaining stocks, FCI had to bear heavy freight.

"As the sale price fixed for export was on ex-FCI godown rate, exporters lifted foodgrains from the godowns situated in far-flung places, irrespective of the fact that sufficient stocks were available with godowns that were near the designated ports," the CAG said.

Freight incurred in 22 districts test-checked in the audit was found to be to be Rs 516.36 crore. The report said those exporting to Bangladesh had been given an unintended benefit of Rs 44.25 crore in transportation by rail, whereas charges of Rs 105.27 crore had been reimbursed, by FCI without obtaining the prescribed documents as directed by the ministry.

The CAG found deficiencies in export proportions and non-compliance of the ministry's instruction while reimbursing transport costs. It said there were also instances of irregularities like non-recovery of penalties, non-submission of export documents, doubtful cases of exports and absence of an adequate control mechanism.